Dealing With Medical Debt: Bankruptcy vs Alternatives

Medical debt is one of the most common reasons for bankruptcy within the United States. Unfortunately, the cost of medical insurance can be prohibitive and not every family can afford to provide medical insurance. This means that even a relatively minor injury- such as a broken bone- can leave a family with hundreds or thousands of dollars in medical bills. For major illnesses, like cancer or a heart attack, medical costs can number in the hundreds of thousands. So, what options do you have if you have medical debt that there is no way you'll never be able to pay back?

Medical Debt Relief Options

Medical debt is a form of unsecured debt, since there is no collateral and nothing that the lender can repossess. This is a good thing, because it gives you a few more options for dealing with a medical debt problem. Generally, your choices are:

• To arrange a payment plan where you pay all of the debt over a period of years. This option may be the best for your credit, but can leave you saddled with huge medical bills for years on end
• To arrange a settlement wherein you agree to pay back less than the full total. This may involve making a single one time lump sum payment or it may involve arranging a payment plan where you pay back less than the total owed. In either case, you'll usually need to be behind on the payments before the lender will agree, since otherwise the lender doesn't really have any incentive to cut you a break
• To file either chapter 7 or chapter 13 bankruptcy, depending on your income. If you qualify for chapter 7, you can get most or all of the medical debts forgiven- but your assets will have to be sold and distributed among your creditors before this happens. If you file chapter 13, you'll be able to arrange a repayment plan in bankruptcy court wherein you pay back some of your debt over a 3-5 year period.

Getting Help

When your medical debt becomes more than you can handle, you need to get help. An experienced attorney can examine your financial situation and the amount of medical debt you have and recommend an appropriate course of action, based on your situation. Your lawyer can also help you to negotiate with your creditors or to file bankruptcy, depending on which option you choose for dealing with the medical debt.